Oregon closer to suing Oracle over Obamacare website woes

Oregon is taking more steps toward suing Oracle over its work on the state's disastrous health-insurance exchange website, Cover Oregon.

State Department of Justice officials this week sent a number of civil investigative demand letters seeking documents connected to the case, as first reported by the Oregonian newspaper. The move follows Oregon Governor John Kitzhaber's recent request to Ellen Rosenblum, the state's attorney general, to initiate a lawsuit against Oracle.

While Rosenblum responded to Kitzhaber's request in a neutral tone, saying her office was performing legwork and developing potential legal strategies, the document demands could mean a lawsuit is coming sooner rather than later.

A Kitzhaber spokesman confirmed reports that the state has paid a Portland law firm more than US$350,000 so far for work preparing a suit, under a contract worth up to $2.5 million in billings.

Oregon has reportedly paid Oracle $130 million for its work on the website. It is holding back more than $25 million in fees Oracle says it is owed.

An Oracle spokeswoman declined to comment on the state's latest moves. But in a previous statement, Oracle said Kitzhaber is trying to "shift blame from where it belongs."

Oregon served as its own systems integrator on the project, hiring Oracle consultants on an hourly basis. That decision and others mean the state is to blame for its own mess, according to Oracle.

"Contrary to the story the state is promoting, Oracle has never led the Oregon Health Exchange project," the statement said. "OHA and Cover Oregon were in charge and badly mismanaged the project by consistently failing to deliver requirements in a timely manner and failing to staff the project with skilled personnel. The Governor admitted as much in his statement, and these facts are supported by extensive documentation."

Oracle expects an investigation will "completely exonerate" the company, it added.

Cover Oregon was supposed to go live Oct. 1 along with the national Healthcare.gov site and a number of other state-level health-insurance exchanges, but immediately suffered from severe performance and stability problems.

The resulting fallout led to the departure of a number of state officials and a controversy than has burned unabated since the failed launch. The state recently decided to move enrollment to the federal exchange.

A federal investigative report on Cover Oregon's problems found blame on both the part of Oracle and state officials, saying the vendor failed to do enough testing and had poor communication skills, while the state did a bad job of overseeing the project and Oracle staffers.

Based on their public posturing, Oregon and Oracle seem headed toward an ugly, and perhaps protracted, legal battle. Still, many software project lawsuits never reach trial, with the parties choosing to settle instead.

The smell of politics is hovering in the air around Cover Oregon, according to one observer.

"Everybody in the business is used to getting well paid for participating in disasters, and there's usually not much downside to it," said Jon Fred, a partner with Adaptive Growth, a consulting firm that offers what it calls a superior way to collect software project requirements, via email Tuesday. "When it's elected officials that are left holding the bag, though, suddenly there's an upside to sharing the blame, something that doesn't happen nearly as much in business."

Indeed, Kitzhaber is up for re-election this year and his poll numbers have sagged of late as the Cover Oregon debacle rages on.

Meanwhile, Oracle's stance that it was solely a hired gun can be held up to some scrutiny in court, according to Brooks Hilliard, a consultant and expert witness who has testified extensively in litigation over troubled software projects. "Even if that's all they agreed to do, they certainly have some responsibility to manage their hourly consultants professionally."

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